Vivendi Said to Plan Sale of Stake in Activision Blizzard

By Cliff Edwards and Marie Mawad -
Jun 30, 2012

Vivendi SA (VIV), the media and
telecommunications company that ousted its chief executive this
week, has decided to seek a buyer for its $8.1 billion stake in
Activision Blizzard Inc. (ATVI), a person with knowledge of the
situation said.

Should no buyer emerge for the 61 percent holding in the
Santa Monica, California-based video-game publisher, Paris-based
Vivendi plans to sell shares in the market, said the person, who
sought anonymity because the plans are private.

Vivendi Chairman Jean-Rene Fourtou is under pressure from
investors to restructure his company and boost the stock price
from a near nine-year low. The board had discussed a sale of
part or all of its stake in publicly held Activision, maker of
the “World of Warcraft” and “Call of Duty” titles, people
with knowledge off the talks said earlier this month.

A Vivendi spokesman didn’t respond to an e-mailed request
for comment outside of business hours in France. Cassandra Bujarski, an outside spokeswoman for Activision, had no comment.

Activision, the largest U.S. video-game publisher, rose 4.4
percent to $11.99 on June 29 in New York. The shares have
declined 2.7 percent this year. Vivendi gained 3.1 percent to
14.63 euros in Paris, and is down 11 percent this year. The
stock reached a nine-year low of 12.01 euros on April 19.

Vivendi Downgrades

Moody’s Investors Service and Fitch Ratings warned Vivendi
this past week that its debt ratings could be threatened if it
doesn’t reduce liabilities. Fourtou on June 28 ousted Chief
Executive Officer Jean-Bernard Levy, who had resisted major
changes in Vivendi’s structure.

A shifting market for video games may limit Activision’s
attraction to buyers.

Activision trades at 14.4 times trailing earnings,
according to data compiled by Bloomberg, below the 25.4 in
fiscal 2010 and a five-year of high of 67.6 in 2007. Electronic
Arts Inc. (EA), the second-largest game company, trades at 30 times
trailing profit.

The multiple reflects investor concern over growth
prospects during a transition phase for the video-game industry
with the introduction of the first new consoles in seven years,
said Edward Woo, an analyst with Ascendiant Capital Markets LLC
in Irvine, California.

Online Growth

Industry growth is now taking place on social-media
websites such as Facebook.com and away from traditional family
room consoles from Microsoft Corp. (MSFT), Sony Corp. (6758) and Nintendo Co.
U.S. sales of packaged games like those played on Xbox or
PlayStation fell 6 percent to $8.83 billion last year, according
to researcher NPD Group Inc.

“The problem is there are no readily apparent buyers for
Activision,” Pachter said. “The only option left to Vivendi is
to lever up Activision’s balance sheet and pay out all of its
cash as a dividend, then spin the company off.”

Both Pachter and Woo recommend buying Activision stock.

Activision had $3.48 billion in cash and short-term
investments as of March 31 and no debt, according to a quarterly
filing. Last year, the company returned $886 million to
shareholders in stock repurchases and dividends, the annual
report shows.